Legalizing recreational marijuana has spawned a surge of activity in some unexpected places and pumped formerly “dark” money into the larger economy.
Estimates are that cannabis sales nationally this year will total about $2.6 billion, with Colorado claiming about a third of that or $840 million, according to rough estimates from ArcView Group.
Some of that money is funneling down to accountants, software developers, trademark lawyers, lighting vendors, general contractors and a long list of others supporting the new industry.
“It is very difficult to estimate,” said Patrick Rea, co-founder and managing director of CanopyBoulder, a business accelerator for cannabis companies focused on ancillary products and services.
ArcView helps investors prospect for cannabis-related startups and is a partner in CanopyBoulder. Rea is helping ArcView calculate economic impacts along the industry’s supply chain, an exercise he previously undertook for the natural foods industry.
Current estimates suggest another $350 million to $650 million is spent nationally on goods and services related to bringing cannabis products to market, Rea said. Assuming it is $500 million, and that Colorado again accounts for about a third, vendors here could receive around $161 million this year.
At Thrive Workplace Solutions in posh Cherry Creek North, far from the warehouse districts where cannabis is grown, two entrepreneurs are looking for a big payday providing technology to an industry moving away from paper-and-pencil.
“We don’t ever touch the product, but we help the guys that do,” said Rob Rusher, CEO of GrowBuddy, which is developing an application to log environmental conditions and boost yields and reduce costs.
Rusher is giving away the app, which digitizes what are known in the industry as grow journals. The trade-off is gaining access to “big data,” he said.
“Data is power regardless of the industry,” said Rusher, who also is developing an online grower supply marketplace within the app.
GrowBuddy is working closely with Grow Remote, a startup founded by Greg Eisenbeis, a process engineer who is tapping his expertise in automation and control systems to monitor and automate cannabis cultivation.
Automation, in theory, should cut labor costs, improve energy efficiency and boost plant yields. And the technologies GrowBuddy and Grow Remote are developing should transfer to growing any kind of plant in a controlled setting indoors.
“We are coming to the game with experience on what is a really great way to control all of this,” he said.
An often-repeated phrase is that legalization has created the equivalent of a gold rush, minting wealth not only for those who strike gold but also for those selling the picks and shovels.
“This is a substantial growth opportunity with a substantial risk. That combination brings a very specific type of personality,” said Denver attorney Steven Weigler, founder of EmergeCounsel. “There are a lot of speculators.”
Weigler launched his business this year, intending to work with a variety of startups. But given his timing, about 40 percent of his work is linked to cannabis.
Those supporting the industry face a different kind of payoff than those opening a dispensary or raising crops, ArcView CEO Troy Dayton said.
Their reward is more uncertain and takes longer to achieve. But it could prove much larger as more states legalize.
“Colorado is one of the key places for innovation in this space, and you will see more and more companies coming out of Colorado on the ancillary side,” Dayton predicts.
Some entrepreneurs start out trying to get a dispensary license and turn to playing a supporting role when they fail. Others have never touched the stuff but chase what they see as a growth opportunity.
And there are a few, like Nathan Mendel, owner of Your Green Contractor, who stumble into the field and never look back.
An architect friend asked in 2011 if he wanted to work on a dispensary. “It sounded like a retail project. I didn’t think about it either way,” he said.
That job led to one referral and then another. Your Green Contractor now is sought out nationally, and Mendel is considered an expert in converting old buildings into growing facilities.
Trying to grasp how big the cannabis support industry is in Colorado is difficult. The industry is so new — not to mention still illegal on the federal level — that the specific codes tracking employment and business formations aren’t in place yet.
But here is one clue: A Denver Post analysis of business registrations with the Colorado secretary of state that included the word “cannabis” in the name went from only 17 between 2000 and 2008, to more than 575 since 2009, including about 275 the past two years.